Welcome to Semiconductor Manufacturing International Corporation's Third Quarter 2026 webcast conference call. Today's call will be simultaneously streamed through the internet and telephone. Please be advised that if you join the meeting by phone, your dials-in are in listen-only mode. However, after the conclusion of the management presentation, we will have a question-and-answer session. At that time, you will receive instructions on how to participate. [Non-English content ] Without further ado, I would like to introduce Ms. Guo Guangli, Senior Vice President and Board Secretary, to host the webcast. [Non-English content ]
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Greetings. Welcome to SMIC Third Quarter 2026 webcast conference call. Attending today's call are Dr. Zhao Haijun, Co-Chief Executive Officer, Dr. Wu Junfeng, Senior Vice President and Person in Charge of Finance.
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Let me remind you that today's presentation contains forward-looking statements that do not guarantee future performance but represent the company's expectations and are subject to inherent risk and uncertainties. Please refer to the forward-looking statement in our earnings announcement. Please note that today's earnings statement is presented in accordance with International Financial Reporting Standards, IFRS, and currency figures are in US dollars unless otherwise stated.
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I will now hand the call to Dr. Wu Junfeng to introduce the company's financial status.
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First, I will report our unaudited results for the third quarter, followed by our guidance for the fourth quarter.
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The third quarter results were as follows: Revenue was $3,190 million, up 6.1% sequentially. Gross margin was 29.9%, up 4.6 percentage points sequentially. Profit from operations was $710 million. EBITDA was $2,040 million. EBITDA margin was 63.9%. Profit attributable to the company was $428 million.
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Moving to the balance sheet, at the end of the third quarter, the company had total assets of $59.1 billion, of which total cash on hand was $13.4 billion. Total liabilities were $20.4 billion, of which total debt was $14.9 billion. Total equity was $38.7 billion. Debt to equity ratio was 38.5%, and net debt to equity ratio was 3.9%.
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In terms of cash flow, in the third quarter, net cash generated from operating activities was $1,182 million. Net cash used in investing activities was $2,104 million. Net cash generated from financing activities was $910 million.
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For the fourth quarter 2026, our guidance is as follows: Revenue is expected to increase by 4%-6% sequentially, and gross margin is expected to be in the range of 26%-28%.
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This concludes the financial status. Thank you.
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Thank you, Dr. Wu. Next, I will hand the call to Dr. Zhao Haijun to comment on operations.
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Hello, everyone. Thank you for attending SMIC's third quarter 2026 earnings call.
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In the third quarter, the company's overall revenue hit a new record high of $3.19 billion, a sequential increase of 6.1%. Compared with three months ago, we have observed that the incremental growth in customer pull-in demand for AI peripheral chips such as BCD, specialty memory, and controller has outpaced initial expectations, driving third quarter revenue above the upper end of our guidance range. On the volume side, the company accelerated the qualification for new production lines and flexibly reallocated existing capacity. Quarterly shipment exceeded 3 million 8 in equivalent standard logic wafers for the first time, up 5.7% sequentially. On the pricing side, price agreed with customers were implemented in phases. The product mix continued to improve, and the blended wafer ASP rose 1.8% quarter-over-quarter.
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Next, let's take a look at the company's third quarter revenue breakdown. In terms of revenue by region, China, America, and Eurasia accounted for 90.8%, 7.8%, and 1.4% respectively. The revenue amount from China increased by 7% sequentially, mainly driven by higher demand growth from Chinese customers compared to the company's overall level. The company reallocated capacity accordingly to meet such customer demand. By size, wafer revenue from 12 in and 8 in accounted for 79% and 21% respectively, with proportion stable. The wafer revenue amount from 12 in and 8 in increased by 9% and 4% sequentially respectively, supported by robust customer demand and the company's capacity expansion primarily focusing on 12 in production lines.
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By application, wafer revenue from smartphone, computer and tablets, consumer electronics, Connectivity and IoT, industrial and automotive accounted for 14%, 18%, 41%, 7%, and 19% respectively. From the perspective of the absolute revenue, smartphone and consumer electronics decreased by 8% and 1% sequentially, with demand remaining soft. Overall market demand for computer and tablets, industrial and automotive, connectivity and IoT was broadly flat. However, the company benefited from the domestic supply chain reshuffling and its forward-looking platform deployment, with relative revenue posting quarter-over-quarter growth of 26%, 26%, and 18% respectively. For example, the company has already established a comprehensive BCD low, medium, and high voltage portfolio across the industrial and automotive applications, offering a diverse range of differentiated device and processes, supporting up to automotive Grade zero.
The product portfolio covers BMS, AFE, SBC, digital isolator, isolated sensing and power, smart power switches to fully capture incremental demand, especially the demand for high value-added products.
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In the third quarter, the company's gross margin increased by 4.6 percentage points sequentially to 29.9%. This was mainly driven by urgent customer pull-in requirements. To support customer shipments, the company correspondingly reduced engineering and R&D wafer runs, with monthly capacity expanded by an additional 20,000 wafers on an 8 in equivalent standard logic wafer basis. Utilization rate increased by 3.6 percentage points sequentially to 97.3%. Output grew by high single digit percentage quarter-over-quarter, which materially diluted per wafer unit cost. This offset the negative impact of a 2.3% quarter-over-quarter rise in depreciation expense on gross margin, driving a sequential improvement in gross margin and beating the upper end of guidance.
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The fourth quarter follows traditional seasonal pattern. However, the company's performance is expected to remain resilient. Although mobile and some consumer orders have seen softness, the company has flexibly reallocated capacity across multi-platforms to specialty memory, BCD, and other high-demand, high-value-added products. For the fourth quarter, the company expects its shipment volume to remain stable. Changes in product mix and market-based pricing will drive an increase in blended ASP. Revenue is expected to increase 4%-6% sequentially. At the same time, cost pressures from depreciation, raw materials, and other items continue to increase. Additionally, the company increases engineering and R&D wafer runs in the fourth quarter. As a result, utilization rate will see a mild decrease on a continuously increasing capacity base. Accordingly, the company's gross margin is expected to be flat versus the prior quarter guidance, which is 26%-28%.
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Based on unaudited financial data for the first three quarters and the midpoint of the fourth quarter guidance, the company expects its full-year revenue to exceed $12 billion, representing a nearly 30% year-over-year growth. Gross margin is expected to be around 26%, an increase of roughly 5 percentage points, with approximately 30% increase of total depreciation year-over-year. At the same time, the overall global equipment supply chain remains tight with extended lead times, and delivery timelines for some equipment remain uncertain. Although this will not impact the execution of this year's expansion plan, it may bring volatility to the full-year CapEx implementation.
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Looking ahead to the foreseeable future, industry visibility is mainly reflected in two aspects. First, AI demand is expected to extend the semiconductor upcycle, accompanied by shifts in growth structure and cyclical pattern. Second, the broad-based localization development of the entire industry chain still continues. Against this backdrop, the company leverages its strategic ties with customers and aligns with the innovation pace of Chinese customers to strengthen its advantages in specialty and customized processes. Accordingly, the company expands capacity in a customer demand-driven manner, builds a leading advantage through a high value-added, high-quality product mix, strive to stabilize EBITDA, namely operating cash generation capability, improve cost control capability and operational efficiency. This will bolster our business resilience to navigate cycles and deliver high-quality sustainable growth.
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Finally, we sincerely thank all customers, suppliers, investors and community for your understanding and strong support. Thank you all.
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Thank you, Dr. Zhao. Next is our Q&A session. Questions will be answered by Dr. Zhao and Dr. Wu. Chinese questions will be answered in Chinese. English questions will be answered in English. Please limit your questions to two per person. I would now like to open up the call for Q&A. Operator, please assist.
Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one one and wait for your name to be announced. The first question comes from the line of Leping Huang of Huatai. Your line is open. Please go ahead.
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Hi, ladies and gentlemen, I believe that the speaker is having some technical difficulties and the conference will resume shortly. Please continue to stand by. We thank you for your patience.
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Thank you for the questions. One moment for our next question. Our next questions will come from the line of Ziyuan Wang from CITIC Securities, [Non-English content ]. Please go ahead, your line is open.
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Thank you for the questions. One moment for our next question. Our next question comes from the line of Kuai Jian of Orient Securities. Your line is open.
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Thank you for the questions. Please hold for our next questions. Our next question comes from the line of Luo Tong of Guotai Haitong [Non-English content]. Please go ahead, your line is open. [ Non-English content] .
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Thank you for the questions. We will now take the next question from Tony Zhang of CLSA. Your line is open, please go ahead. [Non-English content ].
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Thank you for the question. [ Non-English content ] Now, let's hand the call back to Ms. Guo Guangli for closing remarks.
[ Non-English content ] Thank you for participating in today's conference call. Thank you for your trust and support.
[Non-English content ] This concludes SMIC's third quarter webcast conference call. We thank you for joining us today.